C. PROGRAM-SPECIFIC ASSUMPTIONS AND METHODS

The demographic and economic assumptions and methods described in the previous sections are used in a set of models to project future income and cost under the OASDI program. In some cases, the economic assumptions result in the direct calculation of program parameters as described in the following subsection. These parameters affect the level of payroll taxes collected and the level of benefits paid and are calculated using formulas described explicitly in the Social Security Act. In other cases, the combination of demographic and economic assumptions are used indirectly to drive more complicated models that project the numbers of future workers covered under OASDI and the levels of their covered earnings, and the numbers of future beneficiaries and the expected levels of their benefits. The following subsections provide brief descriptions of the derivations of these program-specific factors.

1. Automatically Adjusted Program Amounts

The Social Security Act specifies that certain program amounts affecting the determination of OASDI benefits are to be adjusted annually, in general, to reflect changes in the economy. The law prescribes specific formulas that, when applied to reported statistics, produce automatic revisions in these program amounts and hence in the benefit-computation procedures. These automatic adjustments are based upon measured changes in the national average wage index and the CPI.1 In this section, values are shown for program amounts that are subject to automatic adjustment, from the time that such adjustments became effective through 2013. Projected values for future years are based on the economic assumptions described in the preceding section of this report.

The following two tables present the historical and projected values of the CPI-based benefit increases, as well as the average wage index series and the values of many of the wage-indexed program amounts. In each table, the projections are shown under the three alternative sets of economic assumptions described in the previous section. Table V.C1 includes:

The annual percentage increases which have been applied to OASDI benefits under automatic cost-of-living adjustment provisions in the Social Security Act, based on increases in the CPI.

The annual levels of and percentage increases in the national average wage index. Under section 215(b)(3) of the Social Security Act, the national average wage index for each year after 1950 is used to index the taxable earnings of most workers first becoming eligible for benefits in 1979 or later. This procedure converts a worker's past earnings to approximately their equivalent values near the time of the worker's retirement or other eligibility, and these indexed values are used to calculate the worker's benefit. The average wage index is also used to adjust most of the other program amounts that are subject to the automatic-adjustment provisions.

The OASDI contribution and benefit base--the maximum amount of earnings subject to the OASDI payroll tax in the specified year.

The retirement earnings test exempt amounts--the annual amount of earnings below which beneficiaries are not subject to benefit withholding. A lower exempt amount applies in years before a beneficiary attains normal retirement age (NRA). A higher amount applies for the year in which the beneficiary attains normal retirement age. The retirement test does not apply beginning with the attainment of normal retirement age.

Table V.C1.--Cost-of-Living Benefit Increases, Average Wage Index, Contribution and Benefit Bases, and
Retirement Earnings Test Exempt Amounts, 1975-2013
Calendar year		OASDI benefit increases¹ (percent)	Average wage index ²		OASDI contribution and benefit base ³	Retirement earnings test exempt amount
Calendar year		OASDI benefit increases¹ (percent)	Amount	Increase (percent)	OASDI contribution and benefit base ³	Under NRA⁴	At NRA⁵
Historical data:
	1975	8.0	$8,630.92	7.5	$14,100	$2,520	$2,520
	1976	6.4	9,226.48	6.9	15,300	2,760	2,760
	1977	5.9	9,779.44	6.0	16,500	3,000	3,000
	1978	6.5	10,556.03	7.9	17,700	3,240	4,000
	1979	9.9	11,479.46	8.7	22,900	3,480	4,500

	1980	14.3	12,513.46	9.0	25,900	3,720	5,000
	1981	11.2	13,773.10	10.1	29,700	4,080	5,500
	1982	7.4	14,531.34	5.5	32,400	4,440	6,000
	1983	3.5	15,239.24	4.9	35,700	4,920	6,600
	1984	3.5	16,135.07	5.9	37,800	5,160	6,960

	1985	3.1	16,822.51	4.3	39,600	5,400	7,320
	1986	1.3	17,321.82	3.0	42,000	5,760	7,800
	1987	4.2	18,426.51	6.4	43,800	6,000	8,160
	1988	4.0	19,334.04	4.9	45,000	6,120	8,400
	1989	4.7	20,099.55	4.0	48,000	6,480	8,880

	1990	5.4	21,027.98	4.6	51,300	6,840	9,360
	1991	3.7	21,811.60	3.7	53,400	7,080	9,720
	1992	3.0	22,935.42	5.2	55,500	7,440	10,200
	1993	2.6	23,132.67	.9	57,600	7,680	10,560
	1994	2.8	23,753.53	2.7	60,600	8,040	11,160

	1995	2.6	24,705.66	4.0	61,200	8,160	11,280
	1996	2.9	25,913.90	4.9	62,700	8,280	12,500
	1997	2.1	27,426.00	5.8	65,400	8,640	13,500
	1998	1.3	28,861.44	5.2	68,400	9,120	14,500
	1999	⁶ 2.5	30,469.84	5.6	72,600	9,600	15,500

	2000	3.5	32,154.82	5.5	76,200	10,080	17,000
	2001	2.6	32,921.92	2.4	80,400	10,680	25,000
	2002	1.4	33,252.09	1.0	84,900	11,280	30,000
Intermediate:
	2003	⁷ 2.1	33,892.68	1.9	⁷ 87,000	⁷ 11,520	⁷ 30,720

	2004	1.1	35,057.39	3.4	⁷ 87,900	⁷ 11,640	⁷ 31,080
	2005	1.6	36,507.12	4.1	89,700	11,880	31,680
	2006	2.0	37,907.81	3.8	92,700	12,240	32,760
	2007	2.5	39,401.57	3.9	96,600	12,840	34,080
	2008	2.8	41,021.30	4.1	100,200	13,320	35,400

	2009	2.8	42,671.44	4.0	104,100	13,800	36,720
	2010	2.8	44,382.24	4.0	108,300	14,400	38,280
	2011	2.8	46,142.89	4.0	112,800	15,000	39,840
	2012	2.8	47,988.47	4.0	117,300	15,600	41,400
	2013	2.8	49,850.13	3.9	121,800	16,200	43,080
Low Cost:
	2003	⁷ 2.1	33,898.38	1.9	⁷ 87,000	⁷ 11,520	⁷ 30,720

	2004	.9	35,095.01	3.5	⁷ 87,900	⁷ 11,640	⁷ 31,080
	2005	1.1	36,486.05	4.0	89,700	11,880	31,680
	2006	1.4	37,797.83	3.6	92,700	12,360	32,760
	2007	1.7	39,167.07	3.6	96,300	12,840	34,080
	2008	1.8	40,581.39	3.6	99,900	13,200	35,280

	2009	1.8	42,000.28	3.5	103,500	13,680	36,600
	2010	1.8	43,476.39	3.5	107,100	14,280	37,920
	2011	1.8	44,981.88	3.5	111,000	14,760	39,240
	2012	1.8	46,534.65	3.5	114,900	15,240	40,560
	2013	1.8	48,140.26	3.5	118,800	15,720	42,000
High Cost:
	2003	⁷ 2.1	33,909.16	2.0	⁷ 87,000	⁷ 11,520	⁷ 30,720

	2004	2.7	34,689.53	2.3	⁷ 87,900	⁷ 11,640	⁷ 31,080
	2005	2.6	36,681.63	5.7	89,700	11,880	31,680
	2006	2.2	38,198.10	4.1	91,800	12,120	32,400
	2007	4.0	39,367.07	3.1	96,900	12,840	34,200
	2008	5.6	41,635.34	5.8	100,800	13,440	35,640

	2009	5.4	44,708.10	7.4	104,100	13,800	36,720
	2010	4.6	47,176.90	5.5	110,100	14,640	38,880
	2011	3.9	49,289.76	4.5	118,200	15,720	41,760
	2012	3.8	51,481.02	4.4	124,800	16,560	44,040
	2013	3.8	53,687.37	4.3	130,200	17,280	45,960

1Effective with benefits payable for June in each year 1975-82, and for December in each year after 1982.

2See table VI.F7 for projected dollar amounts of the average wage index beyond 2013.

3Amounts for 1979-81 were specified by Public Law 95-216. The bases for years after 1989 were increased slightly by changes to the indexing procedure, as required by Public Law 101-239.

4Normal retirement age. See table V.C3 for specific values.

5In 1955-82, the retirement earnings test did not apply at ages 72 and over; in 1983-99, the test did not apply at ages 70 and over; beginning in 2000, it does not apply beginning with the month of attainment of NRA. In the year of attainment of NRA, the higher exempt amount applies to earnings in the year prior to the month of NRA attainment. Amounts for 1978-82 specified by Public Law 95-216; for 1996-2002, Public Law 104-121.

6Originally determined as 2.4 percent, but pursuant to Public Law 106-554, is effectively 2.5 percent.

7Actual amount, as determined under automatic-adjustment provisions.

Other wage-indexed amounts are shown in table V.C2. The table provides historical values from 1978, when the amount of earnings required for a quarter of coverage was first indexed, through 2004, and also shows projected amounts through 2013. These other wage-indexed program amounts are:

Figure V.C1.--Primary-Insurance-Amount Formula for the 2004 Cohort
[D]

Figure V.C2.--Maximum-Family-Benefit Formula for the 2004 Cohort
[D]

Table V.C2.--Selected Wage-Indexed Program Amounts,
Calendar Years 1978-2013
Calendar year		AIME bend points in PIA formula ¹		PIA bend points in maximum- family-benefit formula ²			Earnings required for a quarter of coverage	Old-law contribution and benefit base ³
Calendar year		First	Second	First	Second	Third	Earnings required for a quarter of coverage	Old-law contribution and benefit base ³
Historical data:
	1978	^4/	^4/	^4/	^4/	^4/	⁵ $250	^4/
	1979	⁵ $180	⁵ $1,085	⁵ $230	⁵ $332	⁵ $433	260	$18,900

	1980	194	1,171	248	358	467	290	20,400
	1981	211	1,274	270	390	508	310	22,200
	1982	230	1,388	294	425	554	340	24,300
	1983	254	1,528	324	468	610	370	26,700
	1984	267	1,612	342	493	643	390	28,200

	1985	280	1,691	358	517	675	410	29,700
	1986	297	1,790	379	548	714	440	31,500
	1987	310	1,866	396	571	745	460	32,700
	1988	319	1,922	407	588	767	470	33,600
	1989	339	2,044	433	626	816	500	35,700

	1990	356	2,145	455	656	856	520	38,100
	1991	370	2,230	473	682	890	540	39,600
	1992	387	2,333	495	714	931	570	41,400
	1993	401	2,420	513	740	966	590	42,900
	1994	422	2,545	539	779	1,016	620	45,000

	1995	426	2,567	544	785	1,024	630	45,300
	1996	437	2,635	559	806	1,052	640	46,500
	1997	455	2,741	581	839	1,094	670	48,600
	1998	477	2,875	609	880	1,147	700	50,700
	1999	505	3,043	645	931	1,214	740	53,700

	2000	531	3,202	679	980	1,278	780	56,700
	2001	561	3,381	717	1,034	1,349	830	59,700
	2002	592	3,567	756	1,092	1,424	870	63,000
	2003	606	3,653	774	1,118	1,458	890	64,500
	2004	612	3,689	782	1,129	1,472	900	65,100
Intermediate:
	2005	624	3,760	797	1,151	1,501	920	66,600
	2006	645	3,890	825	1,190	1,552	950	68,700
	2007	672	4,050	859	1,239	1,616	990	71,700
	2008	698	4,206	892	1,287	1,678	1,030	74,400

	2009	725	4,371	927	1,338	1,745	1,070	77,400
	2010	755	4,551	965	1,393	1,816	1,110	80,400
	2011	785	4,734	1,004	1,449	1,889	1,160	83,700
	2012	817	4,924	1,044	1,507	1,965	1,200	87,000
	2013	849	5,119	1,085	1,566	2,043	1,250	90,600
Low Cost:
	2005	624	3,761	797	1,151	1,501	920	66,600
	2006	646	3,894	825	1,191	1,554	950	69,000
	2007	672	4,048	858	1,239	1,615	990	71,700
	2008	696	4,194	889	1,283	1,674	1,020	74,100

	2009	721	4,345	921	1,330	1,734	1,060	76,800
	2010	747	4,502	954	1,378	1,797	1,100	79,500
	2011	773	4,660	988	1,426	1,860	1,140	82,500
	2012	800	4,824	1,023	1,476	1,925	1,180	85,200
	2013	828	4,991	1,058	1,527	1,992	1,220	88,200
High Cost:
	2005	624	3,762	797	1,151	1,501	920	66,600
	2006	638	3,849	816	1,178	1,536	940	68,100
	2007	675	4,070	863	1,245	1,624	990	72,000
	2008	703	4,238	898	1,297	1,691	1,040	75,000

	2009	725	4,368	926	1,336	1,743	1,070	77,100
	2010	766	4,619	979	1,413	1,843	1,130	81,600
	2011	823	4,960	1,051	1,518	1,980	1,210	87,600
	2012	868	5,234	1,110	1,602	2,089	1,280	92,700
	2013	907	5,469	1,159	1,673	2,182	1,340	96,600

1The formula to compute a PIA is (1) 90% of AIME below the first bend point, plus (2) 32% of AIME in excess of the first bend point but not in excess of the second, plus (3) 15% of AIME in excess of the second bend point. The bend points pertain to the first year a beneficiary becomes eligible for benefits.

2The formula to compute a family maximum is (1) 150% of PIA below the first bend point, plus (2) 272% of PIA in excess of the first bend point but not in excess of the second, plus (3) 134% of PIA in excess of the second bend point but not in excess of the third, plus (4) 175% of PIA in excess of the third bend point.

3Contribution and benefit base that would have been determined automatically under the law in effect prior to enactment of the Social Security Amendments of 1977. The bases for years after 1989 were increased slightly by changes to the indexing procedure to determine the base, as required by Public Law 101-239.

4No provision in law for this amount in this year.

5Amount specified for first year by Social Security Amendments of 1977; amounts for subsequent years subject to automatic-adjustment provisions.

In addition to the program amounts affecting the determination of OASDI benefits that reflect changes in the economy, there are certain legislated changes that have affected, and will affect, benefits. Two such changes are the scheduled increases in the normal retirement age and in the delayed retirement credits. Table V.C3 shows the scheduled changes in these two important items and their effect on benefits expressed as a percentage of PIA.

Table V.C3.--Legislated Changes in Normal Retirement Age and Delayed Retirement
Credits, for Persons Reaching Age 62 in Each Year 1986 and Later
Year of birth	Year of attainment of age 62	Normal retirement age (NRA)	Credit for each year of delayed retirement after NRA (percent)	Benefit, as a percentage of PIA, beginning at age --
Year of birth	Year of attainment of age 62	Normal retirement age (NRA)		62	65	66	67	70
1924	1986	65	3	80	100	103	106	115
1925	1987	65	3 ¹/₂	80	100	103 ¹/₂	107	117 ¹/₂
1926	1988	65	3 ¹/₂	80	100	103 ¹/₂	107	117 ¹/₂
1927	1989	65	4	80	100	104	108	120
1928	1990	65	4	80	100	104	108	120
1929	1991	65	4 ¹/₂	80	100	104 ¹/₂	109	122 ¹/₂
1930	1992	65	4 ¹/₂	80	100	104 ¹/₂	109	122 ¹/₂

1931	1993	65	5	80	100	105	110	125
1932	1994	65	5	80	100	105	110	125
1933	1995	65	5 ¹/₂	80	100	105 ¹/₂	111	127 ¹/₂
1934	1996	65	5 ¹/₂	80	100	105 ¹/₂	111	127 ¹/₂
1935	1997	65	6	80	100	106	112	130
1936	1998	65

2004 OASDI Trustees Report

2004 OASDI Trustees Report

C. PROGRAM-SPECIFIC ASSUMPTIONS AND METHODS

1. Automatically Adjusted Program Amounts